PARIS • Automakers failing to cut greenhouse gas emissions risk writing a big check to the European Union (EU).
Manufacturers ranging from Renault SA to Mercedes-Benz maker Daimler AG are on the hook for total fines in excess of €14 billion (RM65.12 billion), should they fail to comply with tighter emission regulation phased in from 2020 and in full force the next year, an analysis by IHS Markit shows.
Only a “seismic shift” in demand for electrified vehicles would completely remove the forecast excessive emissions, the forecaster said on Monday in a report. Earlier, analysts at Exane BNP Paribas singled out French automakers PSA Group and Renault as most exposed to any payments, with breaches causing such a hit to automaking profits that failing the new rules was “not an option”.
Carmakers have known for years about the coming change in EU policy, yet many are struggling to drive down average fleet emissions of climate-changing carbon dioxide (CO2). In 2017, CO2 fleet emissions rose for the first time in years after buyers deserted diesel cars, relatively fuel-efficient, in favour of petrol vehicles in the wake of Volkswagen AG’s emissions cheating. Consumers also bought more gas guzzling sport utility vehicles.
Concerns about how carmakers will navigate the unprecedented shift to electric vehicles are weighing on share prices.